# Lab #11. Chapter 11 Perfect Competition

Size: px
Start display at page:

## Transcription

1 University of Lethbridge Department of Economics ECON 1010 Introduction to Microeconomics Instructor: Michael G. Lanyi Lab #11 Chapter 11 Perfect Competition 1) Perfect competition occurs in a market where there are many firms, each selling a(n) A) identical product. B) similar product. C) unique product. D) capital-intensive product. E) competitive product. 2) A price taker is a firm that A) must lower its price if it wants to sell more output. B) must accept the price set by a monopoly. C) cannot influence the price of its product. D) is experiencing economic losses. E) can raise its price if it lowers output. 3) The perfectly competitive firm's demand curve is not A) perfectly elastic at the market price. B) the same as the firm's average revenue curve. C) the same as the firm's marginal revenue curve. D) downward sloping to the right. E) horizontal. 4) In a perfectly competitive industry of 100 firms, the demand curve facing the individual firm A) has unitary elasticity. B) is identical to the industry demand curve. C) is 1/100 of the industry demand curve. D) is one where P = MR = AR. E) is upward sloping. 1

2 5) In a perfect competitive market, the market demand for good X in the industry is A) a downward sloping curve. B) a vertical line. C) an upward sloping curve. D) a straight line. E) determined when the supply curve is known. 6) Complete the following sentence. Marginal revenue is the A) change in total quantity resulting from a 1-unit increase in the price of the product sold. B) change in total revenue resulting from a 1-unit increase in the quantity sold. C) total revenue divided by a 1-unit increase in the quantity sold. D) increase in profit divided by a 1-unit increase in the quantity sold. E) change in price resulting from a 1-unit increase in the quantity sold. Answer: B 7) Suppose a firm that produces in a perfect competitive market wants to raise the price of its product above the market price. What impact might this decision have on the firm? A) The firm's total revenue increases. B) The firm's total revenue decreases. C) Whether the firm's total revenue increases or decreases depends on the elasticity of demand for the firm's product. D) The firm's total revenue drops to zero. E) The firm's total profit is maximized. 2

3 Use the table below to answer the following question(s). Table 11.1 Quantity Sold Price ) Refer to Table 11.1 which represents the revenue schedule for a perfectly competitive firm. If the firm sells 5 units of output, total revenue is A) \$15. B) \$30. C) \$75. D) \$90. E) \$105. 9) Refer to Table 11.1 which represents the revenue schedule for a perfectly competitive firm. If the firm sells 6 units of output, average revenue is A) \$15. B) \$30. C) \$75. D) \$90. E) \$ ) For perfect competition to arise, it is necessary that industry demand be A) inelastic. B) elastic. C) perfectly elastic. D) large relative to the output of a firm. E) small relative to the minimum efficient scale of a firm. Study Guide 3

4 Use the table below to answer the following question(s). Table 11.2 Output Total Revenue (\$) Total Cost (\$) ) Refer to Table 11.2, which represents the total revenue and cost schedule of a perfectly competitive firm. The short-run equilibrium price of the product is A) \$3. B) \$10. C) \$15. D) \$25. E) \$30. 12) Refer to Table 11.2, which represents the total revenue and cost schedule of a perfectly competitive firm. The marginal revenue received from the sale of the 4th unit of output is A) \$3. B) \$15. C) \$10. D) \$120. E) \$30. 13) Refer to Table 11.2, which represents the total revenue and cost schedule of a perfectly competitive firm. The marginal cost of the production of the 5th unit of output is A) \$14. B) \$128. C) \$100. D) \$25. E) \$30. 4

5 14) Refer to Table 11.2, which represents the total revenue and cost schedule of a perfectly competitive firm. If the firm produces 2 units of output, it will make an economic A) profit of \$9. B) profit of \$60. C) loss of \$9. D) loss of \$60. E) loss of \$69. 15) Refer to Table 11.2, which represents the total revenue and cost schedule of a perfectly competitive firm. Profits are maximized at units of output. A) zero B) 7 C) 3 D) 6 E) 5 16) It pays a firm to shut down production if price is A) above minimum average variable cost. B) below minimum average variable cost. C) above minimum average fixed cost. D) below minimum average revenue. E) below average total cost. Answer: B 17) When a perfectly competitive firm makes zero economic profit, its owner, A) is taking a loss. B) will shut down in the short run. C) is making a sufficient income to compensate him for the time and capital that he supplies. D) is suffering economic hardship. E) will exit in the long run. 5

6 18) The costs incurred, even at a zero output, are called A) fixed costs. B) variable costs. C) decreasing costs. D) marginal costs. E) total costs. 19) A firm that temporarily shuts down and produces no output incurs a loss equal to its A) fixed costs. B) variable costs. C) marginal costs. D) marginal revenue. E) average costs. 20) The shutdown point occurs at the point of minimum A) marginal cost. B) average variable cost. C) average fixed cost. D) total cost. E) average total cost. Answer: B 21) A firm maximizes profit by producing the output at which marginal cost equals A) marginal revenue. B) average total cost. C) average variable cost. D) average fixed cost. E) none of the above. 22) If price falls below the minimum of average variable cost, the best a firm can do is A) step up production and make a loss equal to its total variable cost. B) step up production and make a loss equal to its total fixed cost. C) stop production and make a loss equal to its total fixed cost. D) stop production and make a loss equal to its total variable cost. E) stay at the same production level and make a loss equal to the difference between total cost and total revenue. 6

7 23) The firm's supply curve is the upward-sloping part of its A) average variable curve, at all points above the point of minimum average variable cost. B) marginal cost curve, at all points above the point of minimum average fixed cost. C) marginal revenue curve, at all points above the point of minimum average revenue. D) marginal revenue curve, at all points above the point of minimum average total cost. E) marginal cost curve, at all points above the point of minimum average variable cost. 24) Assume that the leather industry is a perfectly competitive industry. The market demand curve for leather is and each individual leather producer's demand curve is. A) vertical; downward sloping B) downward sloping; horizontal C) downward sloping; vertical D) horizontal; horizontal E) horizontal; downward sloping Answer: B 25) The fast food industry cannot be considered a perfectly competitive market because A) fast foods differ from each other. B) a large number of firms produce foods in the industry. C) entry and exit are not easy. D) advertising expenditures play an important role in the industry. E) producers do not have control of the market price. 26).If a profit-maximizing firm's marginal revenue is less than its marginal cost, the firm A) must be experiencing economic losses. B) must be making an economic profit. C) should decrease its output. D) should increase its output. E) must have its average revenue less than its marginal revenue. 27) In the price range above minimum average variable cost, a perfectly competitive firm's supply curve is A) horizontal at the market price. B) vertical at zero output. C) the same as its marginal cost curve. D) the same as its average variable cost curve. E) none of the above. 7

8 28) If a competitive firm is producing in the short run at an output where price is less than average total cost, the firm A) will shut down. B) is breaking even. C) is still making a positive economic profit. D) is experiencing economic losses but will continue to operate as long as price is above minimum average fixed cost. E) is experiencing economic losses but will continue to operate as long as price is above minimum average variable cost. 29) In a perfectly competitive industry, the market price is \$10. An individual firm is producing the output at which MC = ATC = \$15. AVC at that output is \$10. What should the firm do to maximize its short-run profits? A) shut down B) expand output C) contract output D) leave output unchanged E) insufficient information to answer Study Guide 30) In a perfectly competitive industry, the market price is \$8. An individual firm is producing the output at which MC = \$8. AVC at that output is \$10. What should the firm do to maximize its short-run profits? A) shut down B) expand output C) contract output D) leave output unchanged E) insufficient information to answer 31) In which one of the following situations will a perfectly competitive firm earn positive economic profits? A)MR > AVC B)MR > ATC C)ATC > MC D)ATC > AR E)AR > AVC Answer: B Study Guide 8

9 32) If a profit-maximizing firm in a perfectly competitive market is incurring economic losses, then it must be producing a level of output where A) price is greater than marginal cost. B) price is greater than marginal revenue. C) marginal cost is greater than marginal revenue. D) average total cost is greater than marginal cost. E) average total cost is less than marginal cost. 33) If a perfectly competitive firm in the short run is not able to pay all of its variable costs, then it is operating in the range on its marginal cost curve that is A) above the break-even point. B) below the break-even point. C) above the shutdown point. D) below the shutdown point. E) between the shutdown and break-even points. 34) In a perfectly competitive industry, the market price is \$5. An individual firm is producing the level of output where marginal cost is \$5 and is increasing, and average total cost is \$25. What should the firm do to maximize its short-run profits? A) shut down B) expand output C) contract output D) leave output unchanged E) insufficient information to answer 35) Which one of the following is not one of the perfectly competitive firm's decisions? A) whether to produce or temporarily shutdown B) how much to produce, if it produces C) whether or not to raise or lower the plant size D) whether to stay in the industry or exit E) whether to raise or lower its price 9

10 36) Industry supply is the sum of the A) marginal costs of all the individual firms. B) average variable costs of all the individual firms. C) average total costs of all the firms. D) average fixed costs of all the firms. E) supplies of all the individual firms. 37) The supply curve for an individual firm in a perfectly competitive industry is P = 1 + 2Qs. If the industry consists of 100 identical firms, what is industry supply when P = 7? A) 300 units B) 400 units C) 600 units D) 800 units E) none of the above Study Guide Use the figure below to answer the following question(s). Figure ) Refer to Figure 11.5, which represents the short-run production decision of a perfectly competitive firm. The firm is A) making an economic profit. B) taking a loss. C) breaking even. D) failing to cover its opportunity costs. E) going to close down temporarily. 10

11 39) Refer to Figure 11.5, which represents the short-run production decision of a perfectly competitive firm. In the long run, market A) demand will increase. B) demand will decrease. C) supply will increase. D) supply will decrease. E) both supply and demand will decrease. 40) Refer to Figure 11.5, which represents the short-run production decision of a perfectly competitive firm. In the long run, A) firms that remain in the market will expand production. B) market demand will increase. C) market supply will decrease. D) firms will exit the market. E) firms that remain in the market will reduce production. 41) If firms exit an industry, the A) industry supply curve shifts leftward. B) price of the product falls. C) profits of the remaining firms decrease. D) output of the industry increases. E) profits of the remaining firms stay the same. 42) In the long run, A) at least one firm earns positive economic profits. B) no firms can earn more than zero economic profits. C) firms do not have sufficient time to change their plant size. D) firms have some limitations in making proper decisions about their production process. E) firms' total costs consist of both fixed and variable costs. Answer: B 11

12 43) If positive economic profits are being made by firms in a competitive industry, new firms will enter. This will shift the industry A) demand curve leftward, causing market price to fall. B) demand curve rightward, causing market price to rise. C) supply curve leftward, causing market price to rise. D) supply curve rightward, causing market price to fall. E) none of the above. 44) O P T I O N A L Answer: True False Use the figure below to answer the following question(s). Figure ) Refer to Figure 11.1 which represents a cost or revenue curve for a perfectly competitive firm. Curve A represents the firm's A) total fixed cost. B) average fixed cost. C) average variable cost. D) total revenue. E) marginal revenue. 12

13 46) Refer to Figure 11.1 which represents a cost or revenue curve for a perfectly competitive firm. Curve A is straight because the firm A) is a price taker. B) faces constant returns to scale. C) wants to maximize profits. D) has perfect information. E) has constant marginal cost. 47) The closest example of a perfectly competitive industry is the A) airlines industry. B) beer industry. C) gasoline stations. D) fast foods industry. E) wheat industry. Use the figure below to answer the following question(s). Figure ) Refer to Figure 11.6, which represents the short-run production decision of a perfectly competitive firm. The firm is A) making an economic profit. B) taking a loss. C) breaking even. D) meeting all opportunity costs. E) going to close down. Answer: B 13

14 49) Refer to Figure 11.6, which represents the short-run production decision of a perfectly competitive firm. In the long run, market A) demand will increase. B) demand will decrease. C) supply will increase. D) supply will decrease. E) demand and supply will both increase. 50) Refer to Figure 11.6 which represents the short-run production decision of a perfectly competitive firm. In the long run, A) firms that remain in the market will expand production. B) market demand will increase. C) firms will adopt labour-saving technology. D) industry output will remain constant. E) firms will enter the market. 51) In the long run, A) all costs are fixed. B) at least one factor of production is fixed. C) a firm can not exit the industry. D) all costs are variable because there are no fixed factors of production. E) all firms earn positive economic profits. 52) Firms will stop exiting an industry only when A) marginal revenue equals average revenue. B) marginal revenue equals marginal cost. C) economic profits are present once more. D) zero economic profits are being made. E) marginal revenue equals average fixed cost. 14

15 53) The maximum loss for a firm in long-run equilibrium is A) zero. B) its total cost. C) its total variable cost. D) its average total cost. E) none of the above. Study Guide 54) An industry will not be in long-run competitive equilibrium if A) each firm maximizes its short-run profit. B) economic profit is zero, so there is no entry or exit. C) each firm produces at the point of minimum long-run average cost, and has no incentive to change its plant size. D) positive economic profits exist. E) there are external economies or diseconomies. 15

### MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

Chapter 11 Perfect Competition - Sample Questions MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Perfect competition is an industry with A) a

### Chapter. Perfect Competition CHAPTER IN PERSPECTIVE

Perfect Competition Chapter 10 CHAPTER IN PERSPECTIVE In Chapter 10 we study perfect competition, the market that arises when the demand for a product is large relative to the output of a single producer.

### MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question on the accompanying scantron.

Principles of Microeconomics, Quiz #5 Fall 2007 Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question on the accompanying scantron. 1) Perfect competition

### 11 PERFECT COMPETITION. Chapter. Competition

Chapter 11 PERFECT COMPETITION Competition Topic: Perfect Competition 1) Perfect competition is an industry with A) a few firms producing identical goods B) a few firms producing goods that differ somewhat

### Practice Questions Week 8 Day 1

Practice Questions Week 8 Day 1 Multiple Choice Identify the choice that best completes the statement or answers the question. 1. The characteristics of a market that influence the behavior of market participants

### MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

Practice for Perfect Competition Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which of the following is a defining characteristic of a

### MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MBA 640 Survey of Microeconomics Fall 2006, Quiz 6 Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) A monopoly is best defined as a firm that

### Pre-Test Chapter 21 ed17

Pre-Test Chapter 21 ed17 Multiple Choice Questions 1. Which of the following is not a basic characteristic of pure competition? A. considerable nonprice competition B. no barriers to the entry or exodus

### Chapter 9: Perfect Competition

Chapter 9: Perfect Competition Perfect Competition Law of One Price Short-Run Equilibrium Long-Run Equilibrium Maximize Profit Market Equilibrium Constant- Cost Industry Increasing- Cost Industry Decreasing-

### MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

Economics 103 Spring 2012: Multiple choice review questions for final exam. Exam will cover chapters on perfect competition, monopoly, monopolistic competition and oligopoly up to the Nash equilibrium

### Chapter 6 Competitive Markets

Chapter 6 Competitive Markets After reading Chapter 6, COMPETITIVE MARKETS, you should be able to: List and explain the characteristics of Perfect Competition and Monopolistic Competition Explain why a

### MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question on the accompanying scantron.

Principles of Microeconomics Fall 2007, Quiz #6 Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question on the accompanying scantron. 1) A monopoly is

### A. a change in demand. B. a change in quantity demanded. C. a change in quantity supplied. D. unit elasticity. E. a change in average variable cost.

1. The supply of gasoline changes, causing the price of gasoline to change. The resulting movement from one point to another along the demand curve for gasoline is called A. a change in demand. B. a change

### Managerial Economics & Business Strategy Chapter 8. Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

Managerial Economics & Business Strategy Chapter 8 Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets I. Perfect Competition Overview Characteristics and profit outlook. Effect

### CHAPTER 9: PURE COMPETITION

CHAPTER 9: PURE COMPETITION Introduction In Chapters 9-11, we reach the heart of microeconomics, the concepts which comprise more than a quarter of the AP microeconomics exam. With a fuller understanding

### Lab 12: Perfectly Competitive Market

Lab 12: Perfectly Competitive Market 1. Perfectly competitive market 1) three conditions that make a market perfectly competitive: a. many buyers and sellers, all of whom are small relative to market b.

### Learning Objectives. Chapter 6. Market Structures. Market Structures (cont.) The Two Extremes: Perfect Competition and Pure Monopoly

Chapter 6 The Two Extremes: Perfect Competition and Pure Monopoly Learning Objectives List the four characteristics of a perfectly competitive market. Describe how a perfect competitor makes the decision

### MPP 801 Monopoly Kevin Wainwright Study Questions

MPP 801 Monopoly Kevin Wainwright Study Questions MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The marginal revenue facing a monopolist A) is

### MARKETS WITHOUT POWER Microeconomics in Context (Goodwin, et al.), 3 rd Edition

Chapter 16 MARKETS WITHOUT POWER Microeconomics in Context (Goodwin, et al.), 3 rd Edition Chapter Summary This chapter presents the traditional, idealized model of perfect competition. In it, you will

### MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

Chapter 11 Monopoly practice Davidson spring2007 MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) A monopoly industry is characterized by 1) A)

### Practice Multiple Choice Questions Answers are bolded. Explanations to come soon!!

Practice Multiple Choice Questions Answers are bolded. Explanations to come soon!! For more, please visit: http://courses.missouristate.edu/reedolsen/courses/eco165/qeq.htm Market Equilibrium and Applications

### D) Marginal revenue is the rate at which total revenue changes with respect to changes in output.

Ch. 9 1. Which of the following is not an assumption of a perfectly competitive market? A) Fragmented industry B) Differentiated product C) Perfect information D) Equal access to resources 2. Which of

### Final Exam (Version 1) Answers

Final Exam Economics 101 Fall 2003 Wallace Final Exam (Version 1) Answers 1. The marginal revenue product equals A) total revenue divided by total product (output). B) marginal revenue divided by marginal

### MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

Chap 13 Monopolistic Competition and Oligopoly These questions may include topics that were not covered in class and may not be on the exam. MULTIPLE CHOICE. Choose the one alternative that best completes

### CHAPTER 11 PRICE AND OUTPUT IN MONOPOLY, MONOPOLISTIC COMPETITION, AND PERFECT COMPETITION

CHAPTER 11 PRICE AND OUTPUT IN MONOPOLY, MONOPOLISTIC COMPETITION, AND PERFECT COMPETITION Chapter in a Nutshell Now that we understand the characteristics of different market structures, we ask the question

### Figure: Computing Monopoly Profit

Name: Date: 1. Most electric, gas, and water companies are examples of: A) unregulated monopolies. B) natural monopolies. C) restricted-input monopolies. D) sunk-cost monopolies. Use the following to answer

### Market Structure: Perfect Competition and Monopoly

WSG8 7/7/03 4:34 PM Page 113 8 Market Structure: Perfect Competition and Monopoly OVERVIEW One of the most important decisions made by a manager is how to price the firm s product. If the firm is a profit

### Chapter 8. Competitive Firms and Markets

Chapter 8. Competitive Firms and Markets We have learned the production function and cost function, the question now is: how much to produce such that firm can maximize his profit? To solve this question,

### Profit Maximization. 2. product homogeneity

Perfectly Competitive Markets It is essentially a market in which there is enough competition that it doesn t make sense to identify your rivals. There are so many competitors that you cannot single out

### An increase in the number of students attending college. shifts to the left. An increase in the wage rate of refinery workers.

1. Which of the following would shift the demand curve for new textbooks to the right? a. A fall in the price of paper used in publishing texts. b. A fall in the price of equivalent used text books. c.

### MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The four-firm concentration ratio equals the percentage of the value of accounted for by the four

### chapter Perfect Competition and the >> Supply Curve Section 3: The Industry Supply Curve

chapter 9 The industry supply curve shows the relationship between the price of a good and the total output of the industry as a whole. Perfect Competition and the >> Supply Curve Section 3: The Industry

### Learning Objectives. After reading Chapter 11 and working the problems for Chapter 11 in the textbook and in this Workbook, you should be able to:

Learning Objectives After reading Chapter 11 and working the problems for Chapter 11 in the textbook and in this Workbook, you should be able to: Discuss three characteristics of perfectly competitive

### CEVAPLAR. Solution: a. Given the competitive nature of the industry, Conigan should equate P to MC.

1 I S L 8 0 5 U Y G U L A M A L I İ K T İ S A T _ U Y G U L A M A ( 4 ) _ 9 K a s ı m 2 0 1 2 CEVAPLAR 1. Conigan Box Company produces cardboard boxes that are sold in bundles of 1000 boxes. The market

### Pricing and Output Decisions: i Perfect. Managerial Economics: Economic Tools for Today s Decision Makers, 4/e By Paul Keat and Philip Young

Chapter 9 Pricing and Output Decisions: i Perfect Competition and Monopoly M i l E i E i Managerial Economics: Economic Tools for Today s Decision Makers, 4/e By Paul Keat and Philip Young Pricing and

### c. Given your answer in part (b), what do you anticipate will happen in this market in the long-run?

Perfect Competition Questions Question 1 Suppose there is a perfectly competitive industry where all the firms are identical with identical cost curves. Furthermore, suppose that a representative firm

### Chapter 7 Monopoly, Oligopoly and Strategy

Chapter 7 Monopoly, Oligopoly and Strategy After reading Chapter 7, MONOPOLY, OLIGOPOLY AND STRATEGY, you should be able to: Define the characteristics of Monopoly and Oligopoly, and explain why the are

### Chapter 8 Production Technology and Costs 8.1 Economic Costs and Economic Profit

Chapter 8 Production Technology and Costs 8.1 Economic Costs and Economic Profit 1) Accountants include costs as part of a firm's costs, while economists include costs. A) explicit; no explicit B) implicit;

### CHAPTER 12 MARKETS WITH MARKET POWER Microeconomics in Context (Goodwin, et al.), 2 nd Edition

CHAPTER 12 MARKETS WITH MARKET POWER Microeconomics in Context (Goodwin, et al.), 2 nd Edition Chapter Summary Now that you understand the model of a perfectly competitive market, this chapter complicates

ANSWERS TO END-OF-CHAPTER QUESTIONS 23-1 Briefly indicate the basic characteristics of pure competition, pure monopoly, monopolistic competition, and oligopoly. Under which of these market classifications

### Econ 101: Principles of Microeconomics

Econ 101: Principles of Microeconomics Chapter 16 - Monopolistic Competition and Product Differentiation Fall 2010 Herriges (ISU) Ch. 16 Monopolistic Competition Fall 2010 1 / 18 Outline 1 What is Monopolistic

### Chapter 04 Firm Production, Cost, and Revenue

Chapter 04 Firm Production, Cost, and Revenue Multiple Choice Questions 1. A key assumption about the way firms behave is that they a. Minimize costs B. Maximize profit c. Maximize market share d. Maximize

### CHAPTER 10 MARKET POWER: MONOPOLY AND MONOPSONY

CHAPTER 10 MARKET POWER: MONOPOLY AND MONOPSONY EXERCISES 3. A monopolist firm faces a demand with constant elasticity of -.0. It has a constant marginal cost of \$0 per unit and sets a price to maximize

### Econ 202 Exam 3 Practice Problems

Econ 202 Exam 3 Practice Problems Principles of Microeconomics Dr. Phillip Miller Multiple Choice Identify the choice that best completes the statement or answers the question. Chapter 13 Production and

### Chapter 14 Monopoly. 14.1 Monopoly and How It Arises

Chapter 14 Monopoly 14.1 Monopoly and How It Arises 1) One of the requirements for a monopoly is that A) products are high priced. B) there are several close substitutes for the product. C) there is a

### Price Elasticity of Demand & Supply

13 10 Price Elasticity of Demand & Supply A. Price elasticity of demand Elastic demand (Ed > 1) % change in quantity demanded > % change in price Inelastic demand (Ed < 1) % change in quantity demanded

### 12 PERFECT COMPETITION. Chapter. Answers to the Review Quizzes. Page 275. Page 279

Chapter 12 PERFECT COMPETITION Answers to the Review Quizzes Page 275 1. Why is a firm in perfect competition a price taker? One firm s output is a perfect substitute for another firm s output and each

### Chapter 14 Monopoly. 14.1 Monopoly and How It Arises

Chapter 14 Monopoly 14.1 Monopoly and How It Arises 1) A major characteristic of monopoly is A) a single seller of a product. B) multiple sellers of a product. C) two sellers of a product. D) a few sellers

### Name Eco200: Practice Test 2 Covering Chapters 10 through 15

Name Eco200: Practice Test 2 Covering Chapters 10 through 15 1. Four roommates are planning to spend the weekend in their dorm room watching old movies, and they are debating how many to watch. Here is

### Pure Competition urely competitive markets are used as the benchmark to evaluate market

R. Larry Reynolds Pure Competition urely competitive markets are used as the benchmark to evaluate market P performance. It is generally believed that market structure influences the behavior and performance

### Equilibrium of a firm under perfect competition in the short-run. A firm is under equilibrium at that point where it maximizes its profits.

Equilibrium of a firm under perfect competition in the short-run. A firm is under equilibrium at that point where it maximizes its profits. Profit depends upon two factors Revenue Structure Cost Structure

### Multiple Choice Questions for Self Study. (GZ der VWL / Introduction to Economics)

Multiple Choice Questions for Self Study (GZ der VWL / Introduction to Economics) ao. Prof. Dr. B. Yurtoglu) Economic Models 1) The purpose of making assumptions in economic model building is to (a) force

### Practice Questions Week 3 Day 1

Practice Questions Week 3 Day 1 Figure 4-1 Quantity Demanded \$ 2 18 3 \$ 4 14 4 \$ 6 10 5 \$ 8 6 6 \$10 2 8 Price Per Pair Quantity Supplied 1. Figure 4-1 shows the supply and demand for socks. If a price

### Understanding Economics 2nd edition by Mark Lovewell and Khoa Nguyen

Understanding Economics 2nd edition by Mark Lovewell and Khoa Nguyen Chapter 5 Perfect Competition Chapter Objectives! In this chapter you will: " Consider the four market structures, and the main differences

### ECON 103, 2008-2 ANSWERS TO HOME WORK ASSIGNMENTS

ECON 103, 2008-2 ANSWERS TO HOME WORK ASSIGNMENTS Due the Week of June 23 Chapter 8 WRITE [4] Use the demand schedule that follows to calculate total revenue and marginal revenue at each quantity. Plot

### UNIVERSITY OF CALICUT MICRO ECONOMICS - II

UNIVERSITY OF CALICUT SCHOOL OF DISTANCE EDUCATION BA ECONOMICS III SEMESTER CORE COURSE (2011 Admission onwards) MICRO ECONOMICS - II QUESTION BANK 1. Which of the following industry is most closely approximates

### QE1: Economics Notes 1

QE1: Economics Notes 1 Box 1: The Household and Consumer Welfare The final basket of goods that is chosen are determined by three factors: a. Income b. Price c. Preferences Substitution Effect: change

### Chapter 05 Perfect Competition, Monopoly, and Economic

Chapter 05 Perfect Competition, Monopoly, and Economic Multiple Choice Questions Use Figure 5.1 to answer questions 1-2: Figure 5.1 1. In Figure 5.1 above, what output would a perfect competitor produce?

### (P 2 P 1 )/[(P 1 + P 2 )/2]. It shows how flexible sellers are to a change in price.

September 15, 2008 Elasticity of supply The price elasticity of supply measures how quantity offered of a good responds to a change in the good s price. It is defined the same as price elasticity of demand,

### Module 2 Lecture 5 Topics

Module 2 Lecture 5 Topics 2.13 Recap of Relevant Concepts 2.13.1 Social Welfare 2.13.2 Demand Curves 2.14 Elasticity of Demand 2.14.1 Perfectly Inelastic 2.14.2 Perfectly Elastic 2.15 Production & Cost

### University of Lethbridge - Department of Economics ECON 1010 - Introduction to Microeconomics Instructor: Michael G. Lanyi. Lab #4

University of Lethbridge - Department of Economics ECON 1010 - Introduction to Microeconomics Instructor: Michael G. Lanyi Lab #4 Chapter 4 Elasticity MULTIPLE CHOICE. Choose the one alternative that best

### Demand, Supply and Elasticity

Demand, Supply and Elasticity CHAPTER 2 OUTLINE 2.1 Demand and Supply Definitions, Determinants and Disturbances 2.2 The Market Mechanism 2.3 Changes in Market Equilibrium 2.4 Elasticities of Supply and

### Market Supply in the Short Run

Equilibrium in Perfectly Competitive Markets (Assume for simplicity that all firms have access to the same technology and input markets, so they all have the same cost curves.) Market Supply in the Short

### Miami Dade College ECO 2023 Principles of Microeconomics Spring 2015 Practice Test #2

Miami Dade College ECO 2023 Principles of Microeconomics Spring 2015 Practice Test #2 1. If a product's price rises by 6%, and its quantity demanded falls by 8%, then we can say that demand for this product

### MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

Test 2 Review Econ 201, V. Tremblay MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Barbara left a \$25,000 job as an architect to run a catering

### 4. Market Structures. Learning Objectives 4-63. Market Structures

1. Supply and Demand: Introduction 3 2. Supply and Demand: Consumer Demand 33 3. Supply and Demand: Company Analysis 43 4. Market Structures 63 5. Key Formulas 81 2014 Allen Resources, Inc. All rights

### Long Run Supply and the Analysis of Competitive Markets. 1 Long Run Competitive Equilibrium

Long Run Competitive Equilibrium. rinciples of Microeconomics, Fall 7 Chia-Hui Chen October 9, 7 Lecture 6 Long Run Supply and the Analysis of Competitive Markets Outline. Chap 8: Long Run Equilibrium.

### Econ 2113 Test 3 Pledge: I have neither given nor received aid on this exam.

Econ 2113 Test 3 Dr. Rupp Spring 2011 Name: Pledge: I have neither given nor received aid on this exam. Signature: Multiple Choice Identify the choice that best completes the statement or answers the question.

### Microeconomics Topic 7: Contrast market outcomes under monopoly and competition.

Microeconomics Topic 7: Contrast market outcomes under monopoly and competition. Reference: N. Gregory Mankiw s rinciples of Microeconomics, 2 nd edition, Chapter 14 (p. 291-314) and Chapter 15 (p. 315-347).

### Price Theory Lecture 6: Market Structure Perfect Competition

Price Theory Lecture 6: Market tructure Perfect Competition I. Concepts of Competition Whether a firm can be regarded as competitive depends on several factors, the most important of which are: The number

### N. Gregory Mankiw Principles of Economics. Chapter 14. FIRMS IN COMPETITIVE MARKETS

N. Gregory Mankiw Principles of Economics Chapter 14. FIRMS IN COMPETITIVE MARKETS Solutions to Problems and Applications 1. A competitive market is one in which: (1) there are many buyers and many sellers

### Practice Questions Week 6 Day 1

Practice Questions Week 6 Day 1 Multiple Choice Identify the choice that best completes the statement or answers the question. 1. Economists assume that the goal of the firm is to a. maximize total revenue

### INTRODUCTORY MICROECONOMICS

INTRODUCTORY MICROECONOMICS UNIT-I PRODUCTION POSSIBILITIES CURVE The production possibilities (PP) curve is a graphical medium of highlighting the central problem of 'what to produce'. To decide what

### Perfect Competition. Chapter CHAPTER OUTLINE. What s New in this Edition? CHAPTER ROADMAP

Perfect Competition Chapter CHAPTER OUTLINE 1. Explain a perfectly competitive firm s profit-maximizing choices and derive its supply curve. A. Perfect Competition B. Other Market Types C. Price Taker

### Pre-Test Chapter 23 ed17

Pre-Test Chapter 23 ed17 Multiple Choice Questions 1. The kinked-demand curve model of oligopoly: A. assumes a firm's rivals will ignore a price cut but match a price increase. B. embodies the possibility

### Monopolistic Competition

In this chapter, look for the answers to these questions: How is similar to perfect? How is it similar to monopoly? How do ally competitive firms choose price and? Do they earn economic profit? In what

### Microeconomic FRQ s. Scoring guidelines and answers

Microeconomic FRQ s 2005 1. Bestmilk, a typical profit-maximizing dairy firm, is operating in a constant-cost, perfectly competitive industry that is in long-run equilibrium. a. Draw correctly-labeled

### 6. Which of the following is likely to be the price elasticity of demand for food? a. 5.2 b. 2.6 c. 1.8 d. 0.3

Exercise 2 Multiple Choice Questions. Choose the best answer. 1. If a change in the price of a good causes no change in total revenue a. the demand for the good must be elastic. b. the demand for the good

### 13 MONOPOLISTIC COMPETITION AND OLIGOPOLY. Chapter. Key Concepts

Chapter 13 MONOPOLISTIC COMPETITION AND OLIGOPOLY Key Concepts Monopolistic Competition The market structure of most industries lies between the extremes of perfect competition and monopoly. Monopolistic

### CHAPTER 8 PROFIT MAXIMIZATION AND COMPETITIVE SUPPLY

CHAPTER 8 PROFIT MAXIMIZATION AND COMPETITIVE SUPPLY TEACHING NOTES This chapter begins by explaining what we mean by a competitive market and why it makes sense to assume that firms try to maximize profit.

### Econ 101, section 3, F06 Schroeter Exam #4, Red. Choose the single best answer for each question.

Econ 101, section 3, F06 Schroeter Exam #4, Red Choose the single best answer for each question. 1. Profit is defined as a. net revenue minus depreciation. *. total revenue minus total cost. c. average

### Econ 201 Final Exam. Douglas, Fall 2007 Version A Special Codes 00000. PLEDGE: I have neither given nor received unauthorized help on this exam.

, Fall 2007 Version A Special Codes 00000 PLEDGE: I have neither given nor received unauthorized help on this exam. SIGNED: PRINT NAME: Econ 201 Final Exam 1. For a profit-maximizing monopolist, a. MR

### Chapter 16 Monopolistic Competition and Oligopoly

Chapter 16 Monopolistic Competition and Oligopoly Market Structure Market structure refers to the physical characteristics of the market within which firms interact It is determined by the number of firms

### AP Microeconomics 2002 Scoring Guidelines

AP Microeconomics 2002 Scoring Guidelines The materials included in these files are intended for use by AP teachers for course and exam preparation in the classroom; permission for any other use must be

### BPE_MIC1 Microeconomics 1 Fall Semester 2011

Masaryk University - Brno Department of Economics Faculty of Economics and Administration BPE_MIC1 Microeconomics 1 Fall Semester 2011 Final Exam - 05.12.2011, 9:00-10:30 a.m. Test A Guidelines and Rules:

### MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

Chapter 6 - Markets in Action - Sample Questions MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The short-run impact of the San Francisco earthquake

### Midterm Exam #1 - Answers

Page 1 of 9 Midterm Exam #1 Answers Instructions: Answer all questions directly on these sheets. Points for each part of each question are indicated, and there are 1 points total. Budget your time. 1.

### Market for cream: P 1 P 2 D 1 D 2 Q 2 Q 1. Individual firm: W Market for labor: W, S MRP w 1 w 2 D 1 D 1 D 2 D 2

Factor Markets Problem 1 (APT 93, P2) Two goods, coffee and cream, are complements. Due to a natural disaster in Brazil that drastically reduces the supply of coffee in the world market the price of coffee

### Principles of Economics: Micro: Exam #2: Chapters 1-10 Page 1 of 9

Principles of Economics: Micro: Exam #2: Chapters 1-10 Page 1 of 9 print name on the line above as your signature INSTRUCTIONS: 1. This Exam #2 must be completed within the allocated time (i.e., between

### AP Microeconomics 2003 Scoring Guidelines

AP Microeconomics 2003 Scoring Guidelines The materials included in these files are intended for use by AP teachers for course and exam preparation; permission for any other use must be sought from the

### PART A: For each worker, determine that worker's marginal product of labor.

ECON 3310 Homework #4 - Solutions 1: Suppose the following indicates how many units of output y you can produce per hour with different levels of labor input (given your current factory capacity): PART

### AP Microeconomics Review

AP Microeconomics Review 1. Firm in Perfect Competition (Long-Run Equilibrium) 2. Monopoly Industry with comparison of price & output of a Perfectly Competitive Industry 3. Natural Monopoly with Fair-Return

### Revenue Structure, Objectives of a Firm and. Break-Even Analysis.

Revenue :The income receipt by way of sale proceeds is the revenue of the firm. As with costs, we need to study concepts of total, average and marginal revenues. Each unit of output sold in the market

### N. Gregory Mankiw Principles of Economics. Chapter 15. MONOPOLY

N. Gregory Mankiw Principles of Economics Chapter 15. MONOPOLY Solutions to Problems and Applications 1. The following table shows revenue, costs, and profits, where quantities are in thousands, and total

### Chapter 6 MULTIPLE-CHOICE QUESTIONS

Chapter 6 MULTIPLE-CHOICE QUETION 1. Which one of the following is generally considered a characteristic of a perfectly competitive labor market? a. A few workers of varying skills and capabilities b.

### Experiment 8: Entry and Equilibrium Dynamics

Experiment 8: Entry and Equilibrium Dynamics Everyone is a demander of a meal. There are approximately equal numbers of values at 24, 18, 12 and 8. These will change, due to a random development, after

### INTRODUCTORY MICROECONOMICS Instructor: Filip Vesely 12

INTRODUCTORY MICROECONOMICS Instructor: Filip Vesely 12 MIDTERM EXAM will be on March 29 Everything you earn and many things you buy are taxed. Who really pays these taxes? Tax Incidence is the division